Which of the following contributed to the rising mortgage default and foreclosure rates and the eventual economic crisis of 2008?
A) tightened mortgage lending standards and the reduction of loanable funds during 2001-2005
B) the increase in the greed of Wall Street bankers and other commercial lenders
C) the substantial increase in sub-prime and adjustable rate mortgages as a share of the total during 2001-2006
D) the increase in the household savings rate during the two decades following 1985
E) the increase in fixed rate mortgages as a share of the total during the decade prior to the crisis

Question

Quizplus · Accepted Answer

The substantial increase in sub-prime and adjustable rate mortgages as a share of the total during 2001-2006 was a major contributor to the rising mortgage default and foreclosure rates and the eventual economic crisis of 2008. These types of mortgages typically had lower initial interest rates, making them more appealing to borrowers, but often had higher interest rates that would increase after a certain period of time, making payments difficult for many borrowers. This led to a high number of defaults and foreclosures, which had a ripple effect throughout the economy.

Which of the Following Contributed to the Rising Mortgage Default